BIR VS.

FORTUNE TOBACCO CORPORATION

705 SCRA 430

September 30, 2013

FACTS: PETITIONER FTC IS THE MANUFACTURER/PRODUCER OF CIGARETTE BRANDS WITH TAX RATE
CLASSIFICATION BASED ON NET RETAIL PRICE PRESCRIBED BY ANNEX "D" OF R.A. NO. 4280. IMMEDIATELY
PRIOR TO JANUARY 1, 1997, THE ABOVE-MENTIONED CIGARETTE BRANDS WERE SUBJECT TO AD
VALOREM TAX PURSUANT TO THEN SECTION142 OF THE TAX CODE OF 1977, AS AMENDED. HOWEVER,
ON JANUARY 1, 1997,R.A. NO. 8240 TOOK EFFECT WHEREBY A SHIFT FROM THE AD VALOREM TAX
(AVT)SYSTEM TO THE SPECIFIC TAX SYSTEM WAS MADE AND SUBJECTING THE CIGARETTE BRANDS TO
SPECIFIC TAX UNDER SECTION 142 THEREOF, NOW RENUMBERED AS SEC. 145 OF THE TAX CODE OF 1997.

FOR THE PERIOD COVERING JANUARY 1-31, 2000, PETITIONER ALLEGEDLY PAID SPECIFIC TAXES ON ALL
BRANDS MANUFACTURED AND REMOVED IN THE TOTAL AMOUNTS OF P585,705,250.00.

ON FEBRUARY 7, 2000, PETITIONER FILED WITH RESPONDENTS APPELLATE DIVISION A CLAIM FOR
REFUND OR TAX CREDIT OF ITS PURPORTEDLY OVERPAID EXCISE TAX FOR THE MONTH OF JANUARY 2000
IN THE AMOUNT OF P35,651,410.00.

THE CTA RENDERED A DECISION IN CTA CASE NO. 6612 GRANTING THE PRAYER FOR THE REFUND OF THE
AMOUNT OF P355,385,920.00 REPRESENTING OVERPAID EXCISE TAX FOR THE PERIOD COVERING
JANUARY 1, 2002 TO DECEMBER 31, 2002. ON CONSOLIDATED MOTIONS FOR RECONSIDERATION, TAX
COURT RULED WITH A SEMBLANCE OF FINALITY THAT THE RESPONDENT IS ENTITLED TO THE REFUND
CLAIMED.

THE COMMISSIONER APPEALED THE AFORESAID DECISIONS OF THE CTA. THE PETITION QUESTIONING THE
GRANT OF REFUND IN THE AMOUNT OF P680,387,025.00 WAS DOCKETED AS CA-G.R. SP NO. 80675,
WHEREAS THAT ASSAILING THE GRANT OF REFUND IN THE AMOUNT OF P355,385,920.00 WAS DOCKETED
AS CA-G.R. SP NO. 83165. THE PETITIONS WERE CONSOLIDATED AND EVENTUALLY DENIED BY THE CA.
THE APPELLATE COURT ALSO DENIED RECONSIDERATION IN ITS RESOLUTION DATED 1 MARCH 2005.

ISSUE: WON THERE IS A FLAW IN THE INTERPLAY BETWEEN SECTION 145 OF THE TAX CODE AND RR 17-
99.

HELD: THE COURT CONCLUDED THAT RR NO. 17-99 IS INDEED INDEFENSIBLY FLAWED. THE LEGALITY OF
REVENUE REGULATION NO. 17-99 IS THE ONLY DETERMINATIVE ISSUE RESOLVED BY THE JULY 21, 2008
DECISION WHICH WAS THE VERY SAME ISSUE RESOLVED BY THE CA IN THE CONSOLIDATED CA-G.R. SP
NOS.80675 AND 83165 AND EXACTLY THE SAME ISSUE IN CTA NOS. 6365, 6383 AND 6612.

FROM THE FOREGOING COGENT REASONS, THE COURT RULED THAT CA-G.R. SP NO. 83165 SHOULD BE
INCLUDED IN THE FALLO OF THE JULY 21, 2008 DECISION.1WPH IT HELD THAT THERE IS AN AMBIGUITY
IN THE FALLO OF THE JULY 21, 2008 DECISION IN G.R. NOS. 167274-75 CONSIDERING THAT THE PROPRIETY
OF THE CA HOLDING IN CA-G.R. SP NO.83165 FORMED PART OF THE CORE ISSUES RAISED IN G.R. CASE
NOS. 167274-75, BUT UNFORTUNATELY WAS LEFT OUT IN THE ALL-IMPORTANT DECRETAL PORTION OF
THE JUDGMENT. THE FALLO OF THE JULY 21, 2008 DECISION SHOULD, THEREFORE, BE CORRESPONDINGLY
CORRECTED.

TO REITERATE, THE CTA SIMPLY FOLLOWED THE ALL TOO FAMILIAR DOCTRINE THAT "WHEN THERE IS A
CONFLICT BETWEEN THE DISPOSITIVE PORTION OF THE DECISION AND THE BODY THEREOF, THE
DISPOSITIVE PORTION CONTROLS IRRESPECTIVE WHAT APPEARS IN THE BODY OF THE DECISION. VEERING
AWAY FROM THE FALLO MIGHT EVEN BE VIEWED AS IRREGULAR AND MAY GIVE RISE TO A CHARGE OF
BREACH OF THE CODE OF JUDICIAL CONDUCT.

THE CTA IS ORDERED TO ISSUE A WRIT OF EXECUTION DIRECTING THE RESPONDENT CIR TO PAY
PETITIONER FORTUNE TOBACCO CORPORATION THE AMOUNT OF TAX REFUND OF P355,385,920.00 AS
ADJUDGED IN CTA CASE NO. 6612.